Texas Instruments' transformation in full swing

The firm's move to become a highly profitable analog and embedded chipmaker is well under way.

Brian Colello, CPA 6 February, 2015 | 6:00PM
Facebook Twitter LinkedIn

 Texas Instruments TXN hosted its annual call with investors this week to update its strategy regarding capital management. TI's revised financial goals were within the range of our prior expectations and appear quite achievable, and we are maintaining our wide moat rating and US$52 fair value estimate (all figures are in U.S. dollars). We remain fond of management's clear focus on free cash flow generation and consider this investor update to be one of the many reasons TI's managers are exemplary stewards of shareholder capital.

Texas Instruments is the world's largest analog chipmaker and a key supplier of embedded chips into a host of applications. Although TI has walked away from the wireless chip business, which weighed on revenue growth in recent years, we're much more encouraged by its transformation into a higher-margin company.

TI has a leading share of the fragmented yet lucrative analog chip market. Analog chips are used to convert real-world signals, such as sound and temperature, into digital signals that can be processed. We give TI a wide Morningstar Economic Moat Rating for its proprietary analog designs; since analog chips are neither particularly expensive, nor do they require cutting-edge manufacturing techniques, high-quality analog chipmakers tend to be able to maintain healthy pricing yet generate strong profitability over time. Additionally, TI's size allows the firm to compete across a broader spectrum of industries, without its fortunes tied to a single customer or end market.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free
Facebook Twitter LinkedIn

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Analog Devices Inc171.52 USD-0.98Rating
Texas Instruments Inc196.25 USD-0.29Rating

About Author

Brian Colello, CPA

Brian Colello, CPA  Brian Colello, CPA, is director of technology, media, and telecom equity research for Morningstar.

© Copyright 2021 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Cookies